Correlation Between Five Point and American Realty

Can any of the company-specific risk be diversified away by investing in both Five Point and American Realty at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Five Point and American Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Five Point Holdings and American Realty Investors, you can compare the effects of market volatilities on Five Point and American Realty and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Five Point with a short position of American Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Five Point and American Realty.

Diversification Opportunities for Five Point and American Realty

-0.44

Correlation Coefficient

Five Point  American Realty

Very good diversification

The 3 months correlation between Five and American is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Five Point Holdings and American Realty Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Realty Investors and Five Point is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Five Point Holdings are associated (or correlated) with American Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Realty Investors has no effect on the direction of Five Point i.e., Five Point and American Realty go up and down completely randomly.

Pair Corralation between Five Point and American Realty

Considering the 90-day investment horizon Five Point Holdings is expected to generate 1.67 times more return on investment than American Realty. However, Five Point is 1.67 times more volatile than American Realty Investors. It trades about 0.11 of its potential returns per unit of risk. American Realty Investors is currently generating about -0.06 per unit of risk. If you would invest  402.00  in Five Point Holdings on November 27, 2024 and sell it today you would earn a total of  141.00  from holding Five Point Holdings or generate 35.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Five Point Holdings  vs.  American Realty Investors

Five Point Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Five Point Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Five Point demonstrated solid returns over the last few months and may actually be approaching a breakup point.

American Realty Investors

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Realty Investors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Five Point and American Realty

The main advantage of trading using opposite Five Point and American Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Five Point position performs unexpectedly, American Realty can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in American Realty will offset losses from the drop in American Realty's long position.

The idea behind Five Point Holdings and American Realty Investors pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.